Australian government in deal to buy US emergency oil supplies

The Australian Government has arranged to tap into the US Government’s tightly held emergency fuel reserves. To be signed by Australian Energy Minister Angus Taylor and US Energy Secretary Dan Brouillette in Washington Mar. 9, the agreement is designed to bolster low supplies in Australia that have created a vulnerability to price spikes and rationing for customers in the event of a sudden supply disruption.

Australia currently imports 90% of its liquid fuels, but only has storage to last 54 days—a figure well below the 90 days the country is obliged to stockpile under an agreement with the International Energy Agency (IEA)—leaving it vulnerable to volatility linked to major shipping routes like the Strait of Hormuz and the South China Sea.

The deal involves leasing US storage facilities and means Australia will be able to tap fuel reserves in the US if shortages occur at home. The oil stored in the US will count towards Australia’s overall supply, enabling the government to meet IEA requirements.

“The US is a trusted ally who has been essential for global oil security and we are glad to be building on our strong, longstanding relationship, while ensuring Australia is best prepared to act during a global oil disruption,” Taylor said. “This arrangement further improves our ability to ensure stocks of critical diesel, petrol, and aviation fuel to keep the economy going in the event of disruptions to supply chains,” he added.

The US Strategic Petroleum Reserve, stored in caverns in Texas and Louisiana, was established by President Ford in 1975. It is said to hold 640 million bbl of crude oil.

The deal’s signing begins detailed contractual negotiations about how much crude oil Australia can buy from the US and how much space it can use in the underground system to store it.